Do generics offer significant savings to the UK National Health Service?

Dr Panos Kanavos, a lecturer in international health policy at LSE, has investigated the level of discounts on generic medicines reimbursed by the National Health Service (NHS).

Do Generics Offer Significant Savings to the UK National Health Service? uses data on net prices acquired for 12 generic molecules drawn from the 50 most selling generic products in the UK in the first quarter of 2005. For these products, 31 our of a possible 34 presentations (90 per cent) were surveyed and benchmarked with official sources.

The paper concludes that:

It is likely that reimbursed generic prices may be significantly higher than their acquisition cost

A significant proportion of the reimbursed price accrues to the distribution chain in a fashion that resembles an indirect subsidy

It is possible for a single purchaser, such as the NHS, to purchase generic drugs more cheaply than it is prepared to pay for, and consequently, to realise further cost savings for the NHS that could be allocated elsewhere in the service.

Panos Kanavos said: 'The NHS is reimbursing generic medicines at prices higher than their acquisition cost and it appears that a significant proportion of the reimbursed price accrues to the distribution chain in a fashion that resembles an indirect subsidy.

'The NHS can improve efficiency, as well as increase savings, by purchasing generics closer to their market price. This might require changes in the way pharmacies are reimbursed, for instance by changing the way the clawback is calculated or altogether abolishing discounts and introducing a fixed dispensing fee.'

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